Banks and building societies wrote off a massive £3.5 billion of UK consumer debt between April and June, the Bank of England has revealed. The vast sum equates to £40 million each day during the three month period in a painful reminder that bad debts continue to harm the UK banking industry.
Credit card debt accounted for the bulk of the write downs, with £2.1 billion scrapped - a fact that banks will no doubt point to as they defend high interest rates on riskier forms of credit. Overdrafts, personal loans and hire purchase agreements contributed a hefty £1.2 billion of the write downs, while bad mortgage debts accounted for a surprisingly small £184 million of the write offs.
Although undoubtedly a last resort, the decision to write off all outstanding loans does at least provide borrowers with the chance to start afresh. Unfortunately, however, these write downs fuel banks' anxieties, leading to a more cautious lending approach and tightened criteria for loans. Thus, until the volume of these bad debts diminishes, British consumers are unlikely to see banks adopt a more generous approach to credit applications.
Bad Consumer Debts Hit UK Banks
Financial Services > e-banking > Banking news
Bad Consumer Debts Hit UK Banks
Fri, 03 Sep 2010
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